Whistleblowing - A Call for New Legislation

On 24 May, when I posted the first of this trilogy on whistleblowing, I referred to a front page article in Management Today about Michael Woodford, 'the British chief executive who blew the whistle on a $1.7bn (£1bn) corporate fraud at Japanese electronics giant Olympus'.

Little did I know that now, only two weeks later, it would be reported that:

'Woodford has brokered an out-of-court deal with the company over his sacking, believed to involve a multi-million pound payout ...

At a five-minute hearing yesterday (28 May), Mr Woodford's lawyer Thomas Linden QC said that the two sides had reached an 'agreement' to be rubber-stamped by Olympus's board on June 8. Outside the tribunal, Mr Woodford said he could 'give no guidance' on reports he had received an eight-figure settlement ...

'I'm not at liberty, under the terms of the agreement, to go into any detail,' he said. 'But I genuinely hope, in the interests of Olympus, it helps them go forward and also for my own life and that of my family [to go forward]. Hopefully today is a closure, a line has been drawn. The company can move on and I can.'

What announcement will be made after 8 June? Will all the allegations of fraud that Woodward has made be admitted to be true? Will the perpetrators be identified? Will they be punished? Or will the whole thing be washed up in some bland public statement?

Obviously, we do not know. I fear, after 8 June, that we may still not know.

And this - the fact that we may never know - is what worries me and leads me to the point I want to make. For I do hope that, by the terms of this agreement, Olympus will not be able to:

i) 'cover up' the full details of the wrongdoings reported by Woodford

ii) 'protect' the identities of the individuals who perpetrated the 'fraud' (saving them from prosecution and punishment for what may or may not have been criminal activity).

What I do know is that, in my own case against Lintas (reported by Management Today in 1998), by settling out of court, Interpublic were able to:

i) deny me the chance to reveal in Court the full evidence I had gathered against the individual managers involved (which I very much wanted to do)

ii) continue to employ them for many years afterwards (rather than face criminal prosecution).

So why did I settle? Good question. I am afraid you will have to believe me when I say that, such is the legal system by which we are bound, I was left with no option. However, I did refuse to sign a 'gagging' clause, which is why I am at liberty to discuss the case now.

So, for the purposes of the case I want to make in this post, let's return to the hypothetical case history discussed in my last post.

In scenario I discussed, given that there was an outstanding fee involved, it would be no surprise if the Client were to insist that an agreement 'to settle all outstanding claims' would be conditional on you (the Consultant) agreeing to 'gagging' clauses along the following lines:

'The Consultant (you) agrees and undertakes to the Companies and the Directors not to:

i) Make or publish any statement to a third party concerning this Agreement, the dispute settled by it or the circumstances surrounding the termination of the Consultant's involvement in the Companies;

ii) Make or publish any derogatory or disparaging statement or do anything in relation to the Companies, the Directors and any employees of or consultants to the Companies which is intended to or which might be expected to damage or lower their respective reputations.'

Now this is what I object to.

Why should any company be able to 'gag' a whistleblower to protect their reputations?

The human insight I would make, based on my own painful experience, is that it is the whistleblower - the honest broker who stands up for what he or she thinks is the right thing to do whatever the cost of this stance to their own career or financial interests - who is blamed for being the trouble maker (not the perpetrators of the fraud).

Why is this?

It is my very strong opinion that it should be against the law - a criminal offence - for any company, or the directors of any company and even their lawyers, to draw up 'agreements' whereby paying money to a whistleblower is made subject to that person agreeing not to reveal the financial wrongdoing or fraud he or she has unwillingly discovered.

This is the classic corporate 'cover up'. And far too much of it goes on in business today.

In this vital debate we are having about how capitalism can work for the good of society as a whole, how can business people be allowed to 'cover up' fraud in this way?

It is an absolute disgrace, of which everyone in business should be thoroughly ashamed.